UK Inflation Expected to Rise in September
UK inflation is expected to increase in September due to higher fuel and energy costs. Economists predict the Consumer Prices Index (CPI) inflation rate will rise to 3.4%, up from 3.1% in August, according to Pantheon Macroeconomics. August's CPI rate was already above the Bank of England's 2% target.
Higher motor fuel prices are likely to play a big role in this increase. Diesel prices exceeded £2 per litre for the first time at the start of September, as reported by the RAC. The end of a temporary VAT cut on family attractions, like theme parks and zoos, is also expected to push prices higher.
Sanjay Raja, chief UK economist for Deutsche Bank, noted that food price increases have been modest due to strong competition among supermarkets. However, he warned that this could change as energy costs and extreme weather affect prices. The upcoming increase in Ofgem's price cap on household energy bills, starting in October, is likely to raise living costs for dual-fuel households this winter. The International Monetary Fund (IMF) has stated that cost-of-living crises hit poorer households harder, as they spend a larger share of their income on essentials like food and energy.
Related coverage: Eurozone Inflation Hits 3.8% Amid Rising Living Costs, Grocery Inflation in Ireland Reaches 4.7% Amid Rising Costs.
Rising inflation could pressure consumer spending and raise expectations for future interest rate changes by the Bank of England. This may impact sectors like energy and consumer goods, especially as households prepare for higher energy bills.
Investors will closely watch the official inflation data release set for early October. This data will clarify how rising costs are affecting the UK economy.
Based on reporting by: standard.co.uk